Davos Man

President Donald Trump boards Air Force One at Andrews Air Force Base in Maryland

The annual Davos event has become a gathering of the very people responsible for a perverse version of globalization—one that has undermined the livelihoods of ordinary people—and stimulated a mass nationalistic backlash that has brought to power people like Donald Trump.

Will Trump use his speech to bash the plutocrats? Or to make it clear that he is their friend? Will he try to pose as economic nationalist and lecture them on all the ways that bad other countries hurt America? Or perhaps he will be detained by the unfortunate matter of the government shutdown.

Rhetorically, Trump (“America First!”) is anti-globalization. He is for re-negotiating trade deals that outsource of America jobs, and bringing back American manufacturing. A few of his officials, notably the U.S. Trade Representative, Robert Lighthizer, are taking this vow seriously and trying to fashion policies to match.

There are, however, three problems. The first is that trade issues are blindingly complicated, and Trump has no patience for detail or nuance. Mainly, he is intuitively brilliant at channeling the discontent.

Second, Trump’s top economic officials (who outrank Lighthizer), namely Goldman Sachs veterans Gary Cohn, who heads the National Economic Council, and Treasury Secretary Steven Mnuchin, epitomize the Davos club and the goal of dismantling a nationally regulated form of capitalism.

Trade Representative Lighthizer may win a few skirmishes, but the Trump administration as a whole is as corporate and as globalist as they come. The recent tax bill, which gives giant corporations a huge tax break for bringing home profits stashed overseas, actually creates new incentives for moving jobs abroad. The Trump administration’s regulatory officials are systematically repealing the remaining rules that make it possible to regulate the abuses of finance when big banks hide their frauds offshore.

Third, while a very different set of global rules is possible, Trump is unlikely to advocate it. The very term, globalization, is widely misunderstood. The issue is often framed as “protectionism” versus “free trade” (and only an economic illiterate would be for protectionism).

But that’s not the real choice at all. Obviously, we are going to have a great deal of trade, technology exchange, and cross-border investment. The real question is: globalization on whose terms?

The Bretton Woods Agreement of 1944, brokered by the Roosevelt administration, created a global financial system that allowed individual countries to strictly regulate financial institutions, to run full-employment economies, and to have tough social protections that would not be defined as violations of somebody’s private property rights.

FDR understood that the global system needed to make room for domestic New Deals. But since the 1980s, as the Davos view has gained power, the Bretton Woods norms have been reversed. Managed capitalism, of the sort that once produced balanced prosperity, has been redefined as protectionist.

Reverting to raw capitalism was supposed to spur economic growth, to the benefit of all. But growth rates in the West are well below those of the postwar golden era. Meanwhile, the nations that have violated the principles of free markets, like China, South Korea, and Japan, have emerged as the world’s export powerhouses.

So what might Trump likely to say, and what should he say?

Trump could view Davos as yet another platform to tell the rest of the world to go to hell, knowing that such rhetoric plays well with his base. But with Trump, you never know whether you are going to get insult or flattery. Indeed, Trump himself probably doesn’t know until the words come out of his mouth.

Flyout/Creative Commons

Davos in winter

Actually, Davos is Trump’s sort of crowd, a kind of Mar-a-Lago in the Alps. He may well opt for a mix of bluster and reassurance, telling the assembled notables that they have nothing to fear from the U.S. as long as they play by balanced rules—and if they don’t, he has the biggest button.

But even if Trump is in a rare, well-modulated mood, this is likely to be a missed opportunity. Some future American president could demand changes to the world trading system more in the spirit of Bretton Woods. That would mean plenty of room for nations to have labor and social protections, as well as industrial policies, without violating the WTO. It could mean insisting that nations like China, which really is protectionist, play by roughly the same rules as the rest of the system, or face high tariffs.

This shift would require clear thinking, deft diplomacy, and a break with global financial elites. None of which describes Donald Trump.